Europe biggest importer of Russian oil & gas even as India is targeted
Energy hungry India is being targeted for purchasing Russian oil to meet its growing demand but fact remains that Europe and parts of Asia are bigger importers of Russian oil and gas even to this date. India’s daily requirement of crude oil is about five million barrels or about 1800 million barrels a year. And it is a well known fact that 85% of India’s crude oil requirements are met through imports. For FY 2020-21, India’s oil imports stood at 1440.3 million barrels; while for the current FY, India has already imported 1289.3 million barrels. Even with announced reductions by one third, EU’s reliance on Russian gas will still remain significant. For gas itself, Europe is still the largest regional importer of Russia’s natural gas, accounting for nearly 75% of Russia’s total natural gas exports. The recipients include Germanyand Italy. Exceptions and exclusions have been built into the design of the sanctions so that Europe can continue to use and pay for Russian crude and gas, sources pointed out. China and Japan are among the top 10 destinations, together accounting for approximately 10%, or 882 billion cubic feet, of Russia’s natural gas exports. Principal sources of import of crude oil by India are: Iraq – 23%; Saudi Arabia – 18%; UAE – 11.3%; Nigeria – 8% and USA – 7.3% It may be pointed out here that Russia is not in top 10 sources of Indian crude imports.
Gas companies in Gujarat invoke force majeure
Manufacturing units dependent on piped natural gas are staring at massive cost pressures. Along with increasing PNG prices, Adani Total Gas Limited and GujaratGas Ltd have imposed force majeure for their industrial customers effective from March 25. This means gas firms have not only revised gas prices but also curtailed the threshold limit to 80% of the daily contract quantity. Due to this, industries taking gas will have to pay pre-determined price for 80% of their DCQ consumption and pay hefty ‘excess gas charges’. ATGL has raised prices of PNG from Rs 71.34 per SCM (standard cubic meter) to Rs 72.34 per SCM effective March 25 for non-Minimum Guarantee Obligation customers. The price for MGO customers has surged from Rs 69.84 to Rs 70.84 per SCM. Excess gas rates have been set at Rs 96.79 per SCM. GGL has kept PNG prices at Rs 58 per SCM but imposed consumption threshold of 80% on DCQ. Excess gas charges applicable are Rs 120 per SCM.
Rationing Looms As Diesel Crisis Goes Global
Earlier this week, Vitol’s chief Russell Hardy warned that a diesel shortage could trigger fuel rationing in Europe. Now, those warnings are multiplying, with fuel rationing no longer looking like an abstract idea. Europe is risking a blow to its economic growth, Reuters reported on Thursday, citing experts. Diesel is what freight transport uses to deliver goods to consumers, but it is also what industrial transport uses for fuel. With Russian refiners cutting their processing rates in the wake of several waves of Western sanctions, already tight diesel supply is going to get a lot tighter. “Governments have a very clear understanding that there is a clear link between diesel and GDP, because almost everything that goes into and out of a factory goes using diesel,” the director general of Fuels Europe, part of the European Petroleum Refiners Association, told Reuters this week. As Vitol’s Russell Hardy noted earlier this week, “Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East. That systemic shortfall of diesel is there.” Europe is not the only one feeling the diesel pinch, however. Middle distillate stocks are on a decline in the United States, too, Reuters’ John Kemp wrote in his latest column. Distillate inventories, according to EIA data, have booked weekly declines for 52 of the last 79 weeks, Kemp reported, falling to 112 million barrels last week. The total decline for the last 79 weeks amounts to 67 million barrels. Last week’s inventory level was the lowest since 2014 and 20 percent lower than the five-year average from before the pandemic. “Diesel is not just a European problem, this is a global problem. It really is,” said Gunvor co-founder and chair Torbjorn Tornqvist at the FT Commodities Global Summit this week. Energy Aspects’ Amrita Sen echoed the sentiment, saying that the diesel shortage was the worst affected oil product, noting that Europe imported close to 1 million barrels daily of Russian diesel and that at the time of the Russian invasion of Ukraine, inventories of the fuel were already much lower than the seasonal average. The problem seems to be that diesel stocks were already tight globally when Russia invaded Ukraine and the West responded with sanctions that, although indirectly, targeted its energy industry. In addition to that, according to Vitol’s Hardy, there had been a shift in Europe from gasoline to diesel, which has further exacerbated the problem. Then there are the commodity traders who are shunning Russian diesel because of the sanctions as well as payment headaches and transportation challenges as many European ports have banned Russian vessels from docking. TotalEnergies is the latest: the French supermajor has said it will be suspending purchases of Russian diesel “as soon as possible and by the end of 2022 at the latest”, the company said, unless it receives other instructions from European governments. Instead of Russian diesel, TotalEnergies said it would switch to other suppliers, notably Saudi Arabia. It will hardly be the only one to look for alternative suppliers. It looks like a hunt for diesel is in the making, if not already fully underway. Meanwhile, the alternative suppliers may not have enough to respond to the spike in demand in short order: Saudi Arabia is already Europe’s second-largest diesel supplier after Russia but compared to its 50-percent share of the EU diesel import market, the Kingdom only has a 12-percent share. Per Kemp’s report, Asian diesel inventories are also tighter than usual, meaning all large markets for middle distillates are experiencing a shortage. This is pushing all oil prices higher, Kemp noted in his column but this is only the beginning of a bigger problem. In addition to freight transport, diesel is the fuel used to power mining and agricultural equipment, and it is also used in manufacturing. With prices for the fuel higher, the prices of the end products will also climb higher, fueling the inflation that has turned into a major headache for Europe and the United States. Boosting local diesel production is another option, but according to experts, they would be buying their crude oil at higher prices, and the end product will, yet again be more expensive. What’s more, this ramp up of middle distillate production will take time to materialize. “Over the next three months, diesel output needs to accelerate significantly, consumption growth must slow, and the market must avoid a significant loss of Russian exports,” Kemp wrote. That would be a best-case scenario and if it does not play out, Europe in particular is in for “a severe price spike” that would result in demand depression. Before the demand depression comes, however, inflation could enter double-digit territory in some of the most vulnerable countries. And if Moscow decides to extend its demand for ruble payments for gas to its oil exports, the situation will become even more interesting than it already is, especially for Europe.
Bring petrol, diesel under GST to ease inflationary burden: PHDCCI
Retail price of petrol and diesel has been increased by Rs 3.2 per litre in the last five days. Prices are set to be raised further given the sharp jump in crude oil prices in the international markets. It will have a cascading impact on the prices of other items and lead to inflationary pressure and hurt growth. It is high time that petroleum products including petrol, diesel and aviation turbine fuel (ATF) are brought under the single nationwide Goods and Services Tax (GST) regime.”Bringing petroleum products under GST will help a lot. It is good for everyone. It is good for the economy,” Pradeep Multani, President, PHD Chamber of Commerce and Industry, told ANI in an interview. He noted that the hike in the prices of petroleum products like petrol and diesel have a huge cascading effect on a number of sectors, ultimately impacting the common people, especially the poor, the most.” Bringing petroleum products in GST will minimise the cascading effect. Companies can avail of the input tax credit. Ultimately the prices will come down,” said Multani, who is also the chairman of Multani Pharmaceuticals Limited. The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman, in September last year, discussed the issue of bringing petroleum products under the GST. However, the Council decided to continue keeping the petroleum products out of the GST purview.
India pays for Russian LNG imports in US dollar
GAIL continues to pay for the LNG it imports from Russia’s Gazprom in US dollars and will seek exchange rate neutrality in case payments are sought in any other currency such as Euro, two sources said. GAIL has a deal to receive 2.5 million tonnes of liquefied natural gas (LNG) annually on a delivered basis from Russia’s Gazprom. This translates into 3 to 4 cargoes or ship loads of super-cooled natural gas every month. The contract with Gazprom provides for making payments in US dollars,” a source with direct knowledge of the matter said. “Payments become due 5-7 days after the delivery of the LNG cargo. The last payment was made on March 23, which was in US dollars.” An LNG shipload was received on March 25 and its payment will be due in early April. There is no indication that the payment for this cargo will be in a currency other than US dollar, sources said. “So far, the US dollar payment continues without any problem,” another source said. “Gazprom has so far not communicated anything to GAIL about change in payment mode.” The last payment was settled through State Bank of India (SBI) – the bank that has been used to pay for imports from Gazprom since the start of supplies in June 2018. GAIL, they said, has so far not received any written communication from Gazprom for change in the currency for settling the payments.